Correlation Between McDonalds and Kibush Capital

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Can any of the company-specific risk be diversified away by investing in both McDonalds and Kibush Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining McDonalds and Kibush Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Kibush Capital Corp, you can compare the effects of market volatilities on McDonalds and Kibush Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in McDonalds with a short position of Kibush Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Kibush Capital.

Diversification Opportunities for McDonalds and Kibush Capital

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between McDonalds and Kibush is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Kibush Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kibush Capital Corp and McDonalds is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on McDonalds are associated (or correlated) with Kibush Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kibush Capital Corp has no effect on the direction of McDonalds i.e., McDonalds and Kibush Capital go up and down completely randomly.

Pair Corralation between McDonalds and Kibush Capital

Considering the 90-day investment horizon McDonalds is expected to generate 69.62 times less return on investment than Kibush Capital. But when comparing it to its historical volatility, McDonalds is 32.13 times less risky than Kibush Capital. It trades about 0.05 of its potential returns per unit of risk. Kibush Capital Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Kibush Capital Corp on September 4, 2022 and sell it today you would earn a total of  0.00  from holding Kibush Capital Corp or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy90.48%
ValuesDaily Returns

McDonalds  vs.  Kibush Capital Corp

 Performance (%) 
       Timeline  
McDonalds 
McDonalds Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in January 2023.

McDonalds Price Channel

Kibush Capital Corp 
Kibush Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kibush Capital Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Kibush Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Kibush Price Channel

McDonalds and Kibush Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds and Kibush Capital

The main advantage of trading using opposite McDonalds and Kibush Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Kibush Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kibush Capital will offset losses from the drop in Kibush Capital's long position.
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The idea behind McDonalds and Kibush Capital Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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